Use the following information pertaining to Totem Holdings #16-#20. You are assessing the optimal capital structure for Totem Holdings, a large publicly traded chemical company with 100 million shares trading at $30 per share and $1 billion in debt outstanding. The firm currently has a pre-tax cost of debt of 6% and you have correctly estimated the current cost of capital to be 9%. The firm is planning to borrow an additional $2 billion (which will push up the pre-tax cost of debt to 7%) and use the proceeds to buy back $1 billion in stock and invest $1 billion in its existing business. For simplicity, assume that the debt beta remains to be zero. The firm's tax rate is 40%, the current riskfree rate is 5%, and the market risk premium is 4%.